Choice Of Law / Alter Ego Issues

Foreign ship owners and operators can be subject to liability under the Jones Act.

In federal district court, sitting in admiralty, resolution of a shipowner’s motion to dismiss Jones Act claims, on forum non conveniens grounds, depends entirely on the resolution of a pivotal issue: the application of U.S. law. Under the seminal Supreme Court case of Hellenic Lines v. Rhoditis, 398 U.S. 306 (1970), a Jones Act case against a foreign shipowner cannot be dismissed on the basis of forum non conveniens, if the foreign shipowner has substantial operational business contacts with the United States.

Initially, in Lauritzen v. Larsen, 345 U.S. 571 (1953), the Supreme Court laid out seven factors to be considered in the choice of law analysis: (1) the place of the wrongful act; (2) the law of the flag; (3) the allegiance/domicile of the seaman;(4) the allegiance of the shipowner; (5) the place of the contract; (6) inaccessibility of a foreign forum; and (7) the law of the forum.

Subsequently, in Rhoditis, 398 U.S. 306 (1970), the Supreme Court created an exception to the Lauritzen factors, and disregarded the emphasis on the vessel’s flag. Instead, the Rhoditis Court held that the Jones Act was applicable if the shipowner/operator had substantial and continuing U.S. contacts. Under Rhoditis, these U.S. contacts outweighed all other factors. In Rhoditis, a Greek seaman, employed under a Greek contract, sought recovery under the Jones Act for injuries sustained on a ship of Greek registry. The Court held that although most of the Lauritzen factors favored application of Greek law, the Jones Act was applicable because of the foreign shipowner’s substantial and continuing U.S. contacts.

Justice Douglas, delivering the opinion, wrote that the Lauritzen test was not to be applied mechanically, “but the significance of the factors must be considered in light of the national interest served by the assertion of Jones Act jurisdiction.” Rhoditis at 309. That particular “national interest” is to “plac[e] a United States shipowner on the same competitive basis as an alien shipowner who is in engaged in extensive business operations in our country.” Id. The Supreme Court specifically recognized that if “the liberal purposes of the Jones Act are to be effectuated, the facade of the operation must be considered minor, as compared with the real nature of the operation, and a cold objective look at the actual operational contacts that the ship and owner have with the United States.” Id. Otherwise, an alien shipowner with operations in the United States might escape his obligations as a “Jones Act employer” and unfairly disadvantage citizens of this country engaged in the same business.

On that theory, the Supreme Court in Rhoditis squarely held that the fact that the Greek corporate owner maintained a base of operations, extensive business, and broad operational contacts with the United States, overcame, as a matter of law, the traditional factors. These factors, including the vessel’s flag, the nationality of the seaman, and the place of contract, were, according to the Supreme Court “minor weights,” in the scales compared with the substantial and continuing contacts that this alien owner had with the United States. See Rhoditis, 398 U.S. at 309.

It is worth noting that the Supreme Court made this choice-of-law determination despite the fact that: 1) the Defendant-shipowner was a Greek Corporation, 2) the Plaintiff-seafarer was a Greek citizen, 3) the Plaintiff-seafarer joined the vessel in Greece, 4) the vessel had a Greek flag 5) the employment contract was signed in Greece, 6) the employment contract provided that Greek law applied between the employer and the seaman and that all claims arising out of the employment contract had to be adjudicated in Greece. The Supreme Court disregarded these facts as “the facade of the [shipowner’s] operation” which “must be considered as minor, compared with the real nature of the operation, and a cold objective look at the actual operational contacts that this ship and this owner have with the United States.”

See Maritime Attorney Carlos F. Llinás argue the Rhoditis factors in opposition to a motion for summary judgment in a recent case.